Oil ends higher as Ukraine, Libya up supply risks

WilliamL. Watts

SAN FRANCISCO (MarketWatch) — Oil futures on Monday extended their gains from last week as turmoil in Ukraine and Libya fueled worries about potential disruptions to global crude supplies, prompting prices to briefly top $103 a barrel.

Crude oil for June delivery
US:CLM4
rose 59 cents, or 0.6%, to settle at $102.61 a barrel on the New York Mercantile Exchange after the contract earlier breached the $103 level. The June contract expires at the close of trading on Tuesday.

Nymex oil prices had climbed 2% last week, finding support from stronger U.S. economic data and anticipation of the start of the summer-driving season.

“Crude is seeing buying interest to start the week as the tenuous improvement seen recently in Libya has hit a wall as the country’s parliament was stormed by a militia” Sunday, said Matt Smith, commodity analyst at Schneider Electric. “Parliament has been disbanded by the military police chief, and chaos reigns.”

“Although oil output has not been impacted ... the potential for this to happen has prices looking nervy — and moving higher,” he said.

Bloomberg

Refining towers at the Zawiya oil refinery near Tripoli, Libya.

July Brent crude
UK:LCON4
the European benchmark, reversed from earlier gains to settle 38 cents, or 0.4%, lower at $109.37 a barrel on the ICE Futures exchange.

A militia group stormed Libya’s parliament Sunday, according to news reports. A Libyan military official who backed the militia said he disbanded parliament after the attack and that the body would be replaced by a 60-member group, according to Bloomberg.

“It seems every time you think you can count on Libya exports to start moving, you can’t,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago, in a note.

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Meanwhile, German officials warned over the weekend that Russia would face additional sanctions if Moscow disrupts coming presidential elections in Ukraine on May 25.

Russian President Vladimir Putin has ordered troops involved in military exercises on the Ukraine border to return to their bases and called on Kiev to immediately remove troops from eastern Ukraine, The Wall Street Journal reported.

Overall, Nymex crude oil seems to “have major bullish forces underlying the day to day price action,” analysts at Lido Isle Advisors in Newport Beach, Calif. wrote in a note issued Monday. “We would not at all be surprised to see crude try to rally to $105, and possibly even $110. $100 could be the new floor this year for crude.”

Supply glut

But hefty U.S. supply levels continue to be a concern for oil traders.

“As shale oil production booms, we’re unable to utilize what is seemingly an overabundance of oil,” said Erik Gebhard, co-founder of Altavest Worldwide Trading. “Oil from shale is nearly clean enough to not need refinement, so as production in that arena continues to grow, a further glut could develop.”

However, U.S. Energy Secretary Ernest Moniz recently said that the nation’s restrictions on oil exports is being reevaluated, Gebhard said. An Energy Department official also told Platts Energy Week on Sunday that the Obama Administration is considering lifting or easing restrictions on oil exports.

Back on Nymex Monday, prices for petroleum products pulled back after posting gains last week, with June gasoline
US:RBM4
ending at $2.965 a gallon, down nearly a penny, and June heating oil
US:HOM4
fell a cent to $2.94 a gallon.

June natural gas
US:NGM14
climbed nearly 6 cents, or 1.3%, to $4.47 per million British thermal units, rebounding after the 1.3% loss it suffered on Friday.

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